The deal Jean-Charles Naouri signed this month to attempt to save his indebted French grocery store group Casino has roots stretching again nearly 30 years to a fateful assembly with a enterprise faculty graduate.
The man some used to name the “godfather of French retail” had summoned 25-year-old franchisee Moez-Alexandre Zouari, eager to know the way the younger entrepreneur’s audacious plan to open 100 shops in apparently saturated city-centre markets may presumably be a good suggestion.
“I told him I had tested it with my wife, and we figured you need a store every 300 metres or so because city residents can’t carry heavy groceries much farther,” Zouari recalled. Naouri, a educated mathematician, “quickly calculated in his head and saw the opportunity”, and shortly invested to assist Zouari develop.
Having labored collectively in numerous varieties ever since, the 74-year-old Naouri is now making one other massive guess on an concept hatched up by Zouari as the chief tries to save lots of what stays of his as soon as sprawling empire forward of looming debt repayments subsequent yr.
The complicated deal would merge Casino’s French meals retailers with Teract, an organization Zouari based with two distinguished French businessmen through a Spac deal final yr. It gives a monetary lifeline that additionally permits Naouri to save lots of face since it’s not an outright sale.
The pair’s longstanding relationship could have made Zouari the one one that may persuade Naouri to relinquish his grip on Casino, mentioned folks near the deal.
“Until now the other deals Naouri had to choose from were all going to hand him a loss,” Zouari instructed the Financial Times, referring to approaches by rivals Carrefour and Auchan. “People don’t understand that he is not just a financier, he is very attached to the company he built.”
Naouri, described as prickly and impartial by individuals who know him, has come to belief Zouari. “He has the ability to focus on the details and also has a vision for the future of retail,” Naouri instructed the Financial Times. “I have a lot of respect for him as a professional . . . and have come to consider him a friend.”
Naouri is a part of a technology of French businessmen, together with Vincent Bolloré and Bernard Arnault, who’ve used complicated monetary engineering to construct enterprise empires through debt-fuelled acquisitions. But the retail sector has been decimated over the previous decade by ecommerce and value wars, and his enterprise has not generated sufficient money to assist its layers of debt.
Casino, whose market worth has shrivelled to lower than €1bn from a peak of €11bn in 2014, has been racing to unload property to make debt repayments, together with a latest chunk of shares in its listed Brazilian enterprise Assai.
If the deal is finalised, Casino will spin out and mix its French retail operation with Teract, a listed firm owned by Zouari, tech billionaire Xavier Niel, banker Matthieu Pigasse and France’s greatest farmers’ co-operative InVivo.
The two sides introduced unique talks earlier this month however disclosed neither a valuation nor how a lot of Casino’s debt can be transferred. Teract will inject at the very least €500mn into the enterprise.
People acquainted with the deal mentioned the mixed retail companies can be positioned in a single entity, with Naouri as chief govt and Casino proudly owning 60 per cent to Teract’s 40 per cent.
A second entity will act as a central buying platform to produce the retail shops with domestically grown fruit and greens, wine and baked items through InVivo’s 300,000 farmers. Zouari will lead it, with Teract and its backers proudly owning 60 per cent to Casino’s 40 per cent.
The concept is to create a vertically built-in retailer to attraction to shoppers who’re prepared to pay a premium for sustainable, domestically sourced meals.
Investors reacted with scepticism on the morning of March 10, hours after the deal was introduced and the identical day Casino disclosed weak annual outcomes. One hedge fund supervisor who has been brief Casino mentioned the “half-baked deal announcement” was an try to distract from the group’s money burn.
Analysts at Barclays mentioned they “struggle to see the benefits of a potential combination with Teract and remain downbeat regarding Casino’s performances in France”.
But there are more likely to be advantages for Naouri, who controls Casino via a collection of holding corporations which have been in a court-protected debt restructuring course of since 2019. Naouri is betting the deal will rejuvenate Casino and stem market share losses, which may assist him persuade the judges overseeing the holding corporations’ restructuring proceedings to present him extra time to pay collectors.
Casino faces €1.2bn in debt maturities in 2024 and €1.8bn in 2025. Another €1.9bn is due at holding firm Rallye in 2025.
Surprisingly, negotiations on how a lot of Casino’s debt can be positioned on the brand new retail group proved simple as a result of Naouri promised to cap it at two occasions earnings earlier than curiosity, tax, depreciation and amortisation, Zouari mentioned. “We thought it would be the toughest part of the talks but in the end it was not.”
Analysts at Bryan Garnier anticipate €2.2bn of Casino’s secured debt with banks to maneuver to the brand new enterprise, and warn that Casino shareholders and unsecured collectors danger dropping out. Meanwhile, Teract can be effectively positioned to scoop up property cheaply ought to Naouri show unable to service his money owed.
On a extra private stage, the transaction may present Naouri with a solution to the thorny query of his successor. The Casino boss has come to treat Zouari as “a spiritual son”, in response to one one that has labored intently with each.
The deal additionally cements Zouari’s rise to the higher echelons of France’s enterprise world after he and his spouse, Soraya, spent a long time constructing their firm within the shadow of Casino. Their fortune was estimated at €1bn final yr by enterprise journal Challenges, placing him 113th in France, whereas Naouri has slipped out of the rankings.
When the Franco-Tunisian entrepreneur hit his pledge of opening 100 Franprix shops after 10 years, Naouri invited him for lunch within the palatial eating room of the unique Hotel Bristol. “I wasn’t used to such grandeur,” Zouari recalled.
He went on to grew to become Casino’s greatest and most worthwhile franchisee, with a peak of about 500 shops collectively owned with Naouri through two corporations. Naouri initially bankrolled the growth in alternate for a minority stake.
In 2019 Zouari began promoting a few of his shares to Naouri, utilizing the proceeds to diversify his household’s enterprise via acquisitions. The following yr he purchased a controlling stake in frozen meals chain Picard and teamed up with Niel and Pigasse to create the Spac that will turn out to be Teract.
When they went to see Naouri as they hunted for its first goal, he made it clear he didn’t need to unload his firm in items. Yet when the trio unveiled a deal final yr to merge with the retail arm of InVivo, Naouri despatched Zouari a congratulatory textual content.
“He is a man of few words so messages like this are rare,” mentioned Zouari. “I thought he was sending me a subtle message that he was interested in our project.”
It was a hunch that proved appropriate — about six months later they started negotiating their subsequent three way partnership.
Additional reporting by Robert Smith in London